The pace of earnings growth in the March quarter stood similar to the previous quarter but slowed from the double-digit growth, which was witnessed in Q4 FY24, according to Raghvendra Nath, MD, Ladderup Asset Managers.  

In an interaction with Business Today, Nath said that aggregate sales of India Inc in Q4 grew 7.2% till June 2, 2025. On the other hand, profit after tax increased 6.6% during the same quarter. These numbers are broadly in line with market expectations and in some cases slightly above analyst expectations.
 
BT:  How do you read sectoral performance in Q4? Which surprised and disappointed D-Street?
 
Nath: On the positive side, the metals and mining sector delivered a good performance. We saw record production across key minerals like iron ore, aluminium, and copper, driven by robust demand from sectors such as steel, construction, and renewables.
 
The hotel sector also had an excellent quarter. There’s been a surge in demand for travel, weddings, and events, which translated into high occupancy rates and strong revenue growth. Many hotel chains are expanding rapidly, opening new properties to keep up with this momentum. While investors are pleased with this sector’s performance, there’s a bit of caution about how hotel stocks will move from here, given their recent run-up.
 
On the other hand, not all sectors had a reason to celebrate. The IT and FMCG industries underperformed this quarter. IT companies struggled with indirect tariff risks, which impacted their earnings, while FMCG players faced sluggish urban demand, resulting in sales and profits that fell short of expectations. It’s a reminder that while some sectors are thriving, others are still navigating headwinds in the current economic climate.  
 
BT: How are the global headwinds affecting earnings of Indian companies?

Nath: Several anticipated negatives appear to have already been priced in. Our trade relations with Russia were not impacted despite the sanctions, and trade with Ukraine has historically been limited. The ongoing China-US tariff tensions is a positive for India, especially in the longer term whereby India is positioned to substitute a good proportion of Chinese imports. Additionally, there’s also a higher potential for many manufacturing facilities to be relocated here. The uncertainty around the already scarce H-1B visa issuances will be beneficial for the IT sector as US-based companies are expected to outsource a higher percentage of work than current levels, potentially boosting demand for Indian IT services.
 
BT:  Are there early signs of rural recovery or slowdown visible in sectoral performance?

Nath: The consumption rebound seen in FY22 and FY23 didn’t sustain and was majorly fuelled by the spends which were funded by borrowed money. Inflation in rural parts grew at a faster pace than nominal rural wages during the three years of FY22-FY24, which constrained the incomes of several rural households. However, several recent developments offer a more constructive outlook. Inflation has begun to moderate, and with interest rates trending downward, the government’s FY26 Budget, which includes income tax cuts, is expected to support household consumption.

Additionally, early showers point to another year of favourable monsoons, which should further aid agricultural output and rural incomes.

Management commentary from Q4FY25 earnings calls paints an optimistic picture about the rural recovery. HUL is seeing a gradual rural demand recovery, although FY25 saw subdued demand. In the 2-wheeler space, Hero MotoCorp recorded the highest ever revenue in FY25, and the company is confident of outperforming the industry in FY26, backed by rural recovery and its high focus on new launches. One of the FMCG players mentioned that commentary from unlisted players, including Indian subsidiaries of MNCs, D2C players and regional brands, indicates a slightly better performance, underscoring broader demand resilience.
 
BT: What are your key takeaways from IT sector’s Q4 results?

Nath: Companies within the IT sector have presented a mixed picture. The backdrop remains challenging, as macro uncertainty continues to weigh on IT demand, marking a softer exit to FY25. Growth in mid-cap IT companies far outpaced that in the large caps, and this trend was seen for most of FY24 and FY25. Now, as we move more towards AI, there is a common misconception that the role of IT companies ends once services are developed. The truth is that successful AI adoption is an ongoing journey. The implementation, integration, and long-term support are essential stages that require sustained involvement and expertise from IT firms. Another positive is the uncertainty about H-1B visas, as I mentioned earlier. These factors are positive for the growth in the sector.
 
BT: How do you see banking and NBFC sector from here onwards?

Nath: We have observed a moderation in credit growth as banks and NBFCs have prioritised asset quality through tighter underwriting standards. As of May 2025, loan growth has slowed to 10% YoY, compared to 16% in May 2024. Deposit growth has started improving on the back of volatility in the stock markets. The unsecured personal loan and microfinance segments have experienced a slowdown in disbursals, along with a rise in delinquencies. Despite these trends, overall asset quality in the sector remains healthy. ICICI Bank has continued to grow at a robust pace, while HDFC Bank’s credit growth was subdued, as expected, due to its focus on reducing the credit-to-deposit ratio. Looking ahead, we anticipate an improvement in credit growth, supported by the RBI’s recent rate cuts and increased liquidity in the system, placing the banking and NBFC segments in a good spot for the next 1-2 years.
 
BT: Which sectors are likely to lead earnings growth in FY26?

Nath: While the overall earnings growth outlook for FY26 is mixed, sectors such as pharmaceuticals, power ancillaries, and hotels are expected to lead in terms of growth. We are hearing a series of optimistic comments from leading drugmakers, with top players forecasting double-digit revenue growth. Power ancillary companies are performing well and are expected to continue their strong performance, driven by rising power consumption, an increasing share of renewable energy, and the growing complexity of transmission and distribution networks.

Meanwhile, the auto, IT, and chemical sectors may continue to face headwinds, though some improvement is possible in the latter half of the year. The FMCG sector is poised for a recovery, and the banking sector is expected to see moderate growth with a focus on asset quality and margin management, given the high cost of funds and increased risk in unsecured lending. Management commentaries varied by sector, providing a mixed outlook for FY26.